Bluejay Diagnostics, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our Chief Executive Officer and our Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, our Chief Executive Officer and our Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Integrated Framework. Based on that assessment and using the COSO criteria, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of December 31, 2022, our internal control over financial reporting was effective. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during the year ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations of Controls Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 32 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022. Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information regarding our equity compensation plans at December 31, 2022: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted- average exercise price of outstanding options, warrants and rights (b) Number of securities (by class) remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Equity compensation plans approved by security holders (1) 719,835 $ 1.96 1,601,990 Equity compensation plans not approved by security holders (2) 559,599 $ 4.20 - (1) Represents shares of common stock issuable upon exercise of outstanding stock options and rights under our 2018 Stock Incentive Plan (the “2018 Plan”) and 2021 Stock Plan (the “2021 Plan”). Both plans permit the Company to grant incentive and nonqualified stock options for the purchase of common stock, and restricted stock awards. The maximum number of shares of common stock reserved for issuance under the 2018 Plan and 2021 Plan are 629,440 and 1,960,000, respectively. At December 31, 2022 there were 262,269 and 1,339,721 shares of common stock available for grant under the 2018 Plan and 2021 Plan, respectively. (2) Consists of warrants issued to placement agents, underwriters and consultants. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is hereby incorporated by reference to our definitive proxy statement for our 2023 annual meeting of stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. 33 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: (1) Financial Statements—See Index to Consolidated Financial Statements at Part II, Item 8 on page F-1 of this Form 10-K. (2) All financial statement schedules have been omitted because they are not applicable or not required or because the information is included elsewhere in the financial statements or the Notes thereto. (3) See the accompanying Index to Exhibits filed as a part of this Form 10-K, which list is incorporated by reference in this Item. (b) See the accompanying Index to Exhibits filed as a part of this Form 10-K. (c) Other schedules are not applicable. 34 INDEX TO EXHIBITS Exhibit No. Description of Document 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.2 Form of Class A Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-41031), filed on November 16, 2021). 4.3 Form of Class B Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.4 Form of Warrant Agency Agreement (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.5 Form of IPO Underwriters’ Warrant (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 4.6 Description of Securities of Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 4.6 to the Company’s annual report on Form 10-K for the year ended December 31, 2021. 10.1** 2021 Stock Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.2 License and Supply Agreement, dated October 6, 2020, by and between Toray Industries, Inc. and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.3** Employment Agreement, dated July 1, 2021, between Neil Dey and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.4** Employment Agreement, dated July 1, 2021, between Gordon Kinder and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.5** Employment Agreement, dated July 1, 2021, between Jason Cook and Bluejay Diagnostics, Inc.* (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.6** Employment Agreement, dated July 1, 2021, between Kevin Vance and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.7 Securities Purchase Agreement, dated June 7, 2021, between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.8 Registration Rights Agreement, dated June 7, 2021, between certain purchasers and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.9 Amendment to License and Supply Agreement, dated July 21, 2021, by and between Toray Industries, Inc. and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 10.10** First Amendment to Employment Agreement, dated January 27, 2023, between Neil Dey and Bluejay Diagnostics, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-41031), filed on January 27, 2023). 14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement on Form S-1 (File No. 333-260029), filed on October 4, 2021). 31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended 32.1* Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101) * Filed herewith. ** Management contract or compensatory plan, contract or arrangement. ITEM 16. FORM 10-K SUMMARY. None. 35 SIGNATURES Pursuant to the requ irements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 20, 2023. Bluejay Diagnostics, Inc. By: /s/ Neil Dey Neil Dey Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Neil Dey Director and Chief Executive Officer March 20, 2023 Neil Dey (Principal Executive Officer) /s/ Kenneth Fisher Chief Financial Officer March 20, 2023 Kenneth Fisher (Principal Financial and Accounting Officer) /s/ Douglas C. Wurth Chairman of the Board of Directors March 20, 2023 Douglas C. Wurth /s/ Donald R. Chase Director March 20, 2023 Donald R. Chase /s/ Svetlana Dey Director March 20, 2023 Svetlana Dey /s/ Fred S. Zeidman Director March 20, 2023 Fred S. Zeidman /s/ Gary Gemignani Director March 20, 2023 Gary Gemignani 36 Index to Consolidated Financial Statements Contents Report of Independent Registered Public Accounting Firm (PCAOB ID # 392 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements in Redeemable Preferred Stock and Stockholders’ Equity (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F- 1 Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Bluejay Diagnostics, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Bluejay Diagnostics, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Uncertainty Relating to Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred net losses since its inception, and has negative cash flows from operations and will need additional funding to complete planned development efforts. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Wolf & Company, P.C. Wolf & Company, P.C. We have served as the Company's auditor since 2017. Boston, Massachusetts Mar ch 20, 20 23 F- 2 Bluejay Diagnostics, Inc. Consolidated Balance Sheets December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 10,114,990 $ 19,047,778 Prepaid expenses and other current assets 1,673,480 1,612,708 Total current assets 11,788,470 20,660,486 Property and equipment, net 1,232,070 337,366 Operating lease right-of-use assets 465,514 - Other non-current assets 35,211 21,019 Total assets $ 13,521,265 $ 21,018,871 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 635,818 $ 295,778 Operating lease liability, current 168,706 - Accrued expenses and other current liabilities 835,730 341,384 Total current liabilities 1,640,254 637,162 Operating lease liability, non-current 323,915 - Other non-current liabilities 15,823 - Total liabilities 1,979,992 637,162 Commitments and Contingencies (See Note 13) Stockholders’ equity: Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 20,215,288 and 20,112,244 shares issued and outstanding at December 31, 2022 and 2021, respectively 2,022 2,011 Additional paid-in capital 28,536,353 28,074,484 Accumulated deficit ( 16,997,102 ) ( 7,694,786 ) Total stockholders’ equity 11,541,273 20,381,709 Total liabilities and stockholders’ equity $ 13,521,265 $ 21,018,871 See notes to consolidated financial statements. F- 3 Bluejay Diagnostics, Inc. Consolidated Statements of Operations For the Years Ended December 31, 2022 2021 Revenue $ 249,040 $ - Cost of sales 200,129 - Gross profit 48,911 - Operating expenses: Research and development 4,152,152 1,147,955 General and administrative 4,763,114 1,792,482 Marketing and business development 451,421 289,726 Total operating expenses 9,366,687 3,230,163 Operating loss ( 9,317,776 ) ( 3,230,163 ) Other income (expense): Interest expense, net of amortization of premium - ( 367,459 ) Impairment of property and equipment ( 237,309 ) - State grant income - 75,000 Other income, net 258,137 34,324 Total other income (expense), net 20,828 ( 258,135 ) Net loss $ ( 9,296,948 ) $ ( 3,488,298 ) Net loss per share - Basic and diluted $ ( 0.46 ) $ ( 0.41 ) Weighted average common shares outstanding: Basic and diluted 20,163,915 8,522,422 See notes to consolidated financial statements. F- 4 Bluejay Diagnostics, Inc. Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity (Deficit) Redeemable, Convertible Preferred Stock Stockholders’ Equity (Deficit) Additional Total Stockholder’s Series A Series B Series C Series D Common Stock Paid-In Accumulated Equity Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance at December 31, 2020 10,600 $ 1,077,303 5,187 $ 1,800,347 636 $ 1,000,465 3,147,200 $ 315 $ - $ ( 4,206,488 ) $ ( 4,206,173 ) Exercise of common stock warrants - - - - - - - - 4,715,836 471 140,990 - 141,461 Accretion of redeemable, convertible preferred stock to redemption value - 73,912 - 33,994 19,961 - - - - ( 127,866 ) - ( 127,866 ) Conversion of convertible debentures into Series D preferred stock - - - - - - 4,500 4,036,535 - - - - Conversion of redeemable, convertible preferred stock into common stock ( 10,600 ) ( 1,151,215 ) ( 5,187 ) ( 1,834,341 ) ( 636 ) ( 1,020,426 ) ( 4,500 ) ( 4,036,535 ) 7,084,323 708 8,041,809 - 8,042,517 Fair value of warrants issued for services - - - - - - - - - - 180,339 - 180,339 Fair value of warrants issued to placement agent in relation to the Convertible debentures - - - - - - - - - 166,816 166,816 Conversion of Amended 2017 Convertible Notes into common stock - - - - - - - - 580,000 58 579,942 - 580,000 Reclassification of Series B Warrants - - - - - - - - - - 145,953 - 145,953 Stock-based compensation expense - - - - - - - - - - 68,458 - 68,458 Issuance of common stock from exercise of stock options - - - - - - - - 56,385 6 22,617 - 22,623 Issuance of common stock in initial public offering, net of offering costs of $ 2,750,601 - - - - - - - - 2,160,000 216 18,855,663 - 18,855,879 Issuance of common stock from exercise of warrants - - - - - - - - 2,368,500 237 ( 237 ) - - Net loss - - - - - - - - - ( 3,488,298 ) ( 3,488,298 ) Balance at December 31, 2021 - $ - - $ - - $ - - 20,112,244 $ 2,011 $ 28,074,484 $ ( 7,694,786 ) $ 20,381,709 Impact of adoption of ASC 842 - - - - - - - - - - - ( 5,368 ) ( 5,368 ) Stock-based compensation expense - - - - - - - - - - 433,004 - 433,004 Exercise of stock options - - - - - - - - 62,944 7 28,869 - 28,876 Exercise of common stock Series B Warrants - - - - - - - - 40,100 4 ( 4 ) - - Net loss - - - - - - - - - ( 9,296,948 ) ( 9,296,948 ) Balance at December 31, 2022 - $ - - $ - - $ - - 20,215,288 $ 2,022 $ 28,536,353 $ ( 16,997,102 ) $ 11,541,273 See notes to consolidated financial statements. F- 5 Bluejay Diagnostics, Inc. Consolidated Statements of Cash Flows For the Year Ended December 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ ( 9,296,948 ) $ ( 3,488,298 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 156,598 145,719 Stock-based compensation expense 433,004 68,458 Amortization of right-of-use assets 149,770 - Impairment of property and equipment 237,309 - Loss on disposal of property and equipment 137 - Issuance of warrants for service - 180,339 Gain on forgiveness of note payable, Paycheck Protection Program - ( 5,000 ) Non-cash interest expense - 227,007 Gain on revaluation of derivative warrant liability - ( 9,676 ) Changes in operating assets and liabilities: Inventory - 84,762 Prepaid expenses and other current assets ( 40,772 ) ( 1,551,637 ) Non-current assets ( 14,192 ) ( 21,019 ) Accounts payable 298,881 ( 79,150 ) Due to related party ( 2,000 ) ( 123,102 ) Accrued expenses 336,620 204,839 Net cash used in operating activities ( 7,741,593 ) ( 4,366,758 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 1,199,270 ) ( 23,947 ) Net cash used in investing activities ( 1,199,270 ) ( 23,947 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of principal on notes payable - ( 289,617 ) Payments of convertible debenture issuance costs - ( 562,842 ) Proceeds from initial public offering, net of offering costs - 18,855,879 Proceeds from issuance of convertible debentures - 4,500,000 Payments on note payable, Paycheck Protection Program - ( 9,000 ) Proceeds from exercise of common stock warrants - 9,079 Payments of deferred offering costs ( 20,000 ) - Payment of finance lease ( 801 ) - Proceeds from exercise of stock options 28,876 22,623 Net cash provided by financing activities 8,075 22,526,122 (Decrease) increase in cash and cash equivalents ( 8,932,788 ) 18,135,417 Cash and cash equivalents, beginning of year 19,047,778 912,361 Cash and cash equivalents, end of year $ 10,114,990 $ 19,047,778 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH FINANCING ACTIVITIES Interest paid $ 364 $ 150,228 Accretion of Series A redeemable, convertible preferred stock dividend $ - $ 17,667 Accretion of Series A redeemable, convertible preferred stock issuance costs and fair value adjustment $ - $ 56,245 Accretion of Series B redeemable, convertible preferred stock dividend $ - $ 31,258 Accretion of Series B redeemable, convertible preferred stock issuance costs $ - $ 2,736 Accretion of Series C redeemable, convertible preferred stock dividend $ - $ 16,727 Accretion of Series C redeemable, convertible preferred stock issuance costs $ - $ 3,234 Exercise of warrants through debt principal conversion $ - $ 132,383 Conversion of convertible debentures into preferred stock $ - $ 4,500,000 Conversion of preferred stock into common stock $ - $ 8,505,982 Conversion of amended 2017 convertible notes $ - $ 580,000 Reclassification of derivative warrant liability into additional paid-in capital $ - $ 145,953 Fair value of warrants issued to placement agent in relation to the Convertible debentures $ - $ 166,816 Fair value of warrants for common stock issued for services $ - $ 180,339 Fair value of warrants issued to underwriters $ - $ 2,939,327 Liabilities incurred for the purchase of property and equipment $ 41,159 $ - See notes to consolidated financial statements. F- 6 Bluejay Diagnostics, Inc. Notes to the Consolidated Financial Statements 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION Business Bluejay Diagnostics, Inc. (“Bluejay” and/or the “Company”) is a medical diagnostics company developing rapid tests using whole blood on our Symphony technology platform (“Symphony”) to improve patient outcomes in critical care settings. The Company’s Symphony platform is a combination of Bluejay’s intellectual property (“IP”) and exclusively licensed and patented IP that consists of a mobile device and single-use test cartridges that if cleared, authorized, or approved by the U.S. Food and Drug Administration (the “FDA”), can provide a solution to a significant market need in the United States. Clinical trials indicate the Symphony device produces laboratory-quality results in less than 20 minutes in critical care settings, including Intensive Care Units (“ICUs”) and Emergency Rooms (“ERs”), where rapid and reliable results are required. Bluejay’s first product, the Symphony IL-6 test, is for the monitoring of disease progression in critical care settings. IL-6 is a clinically established inflammatory biomarker, considered a ‘first-responder,’ for assessment of severity of infection and inflammation across many disease indications, including sepsis. A current challenge of healthcare professionals is the excessive time and cost associated determining a patient’s level of severity at triage and the Symphony IL-6 test has the ability to consistently monitor this critical care biomarker with rapid results. In the future Bluejay plans to develop additional tests for Symphony including two cardiac biomarkers (hsTNT and NT pro-BNP) as well as other tests using the Symphony platform. The Company does not yet have regulatory clearance for its Symphony products, and its Symphony products will need to receive regulatory authorization from the FDA in order to be marketed as a diagnostic product in the United States. Bluejay’s operations to date have been funded primarily through the proceeds of the Company’s initial public offering (the “IPO”) in November 2021 (the “IPO Date”). On June 4, 2021, the Company formed Bluejay Spinco, LLC, a wholly-owned subsidiary of the Company, for purposes of further development of the Company’s ALLEREYE diagnostic test. ALLEREYE is a point-of-care device offering healthcare providers a solution for diagnosing Allergic Conjunctivitis. Initial Public Offering The Company completed its initial public offering (the “IPO”) in November 2021 (“IPO Date”), whereby it sold 2,160,000 Units at a price of $10.00, with each Unit consisting of one share of the Company’s common stock, one warrant to purchase one share of common stock at an exercise price of $7.00 per share (“Class A Warrant”), and one warrant to purchase one share of common stock at an exercise price of $10.00 (“Class B Warrant”) (collectively, a “Unit”). Each warrant contained within the Units is exercisable until the fifth anniversary of the IPO Date, however, holders of Class B Warrants may exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $10.0 million of volume is traded in the Company’s common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A Warrants and Class B Warrants, shortly after the IPO Date which resulted in an additional issuance of 324,000 Class A Warrants and 324,000 Class B Warrants. The gross proceeds from the IPO were approximately $21.6 million and were offset by $2.8 million in offering costs. F- 7 Risks and Uncertainties The Company is subject to a number of risks similar to other companies in its industry, including rapid technological change, competition from larger biotechnology companies and dependence on key personnel. The Company is also impacted by inflationary pressures and global supply chain disruptions currently impacting many companies. On October 25, 2022, the Company received a notification letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the closing bid price for its common stock had been below $ 1.00 for the previous 30 consecutive business days and that the Company therefore is not in compliance with the minimum bid price requirement for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification has no immediate effect on the listing of the Company’s common stock on the Nasdaq Capital Market. The Company intends to take all reasonable measures available to achieve compliance and allow for continued listing on the Nasdaq Capital Market. However, there can be no assurance that the Company will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria. Going Concern The Consolidated Financial Statements for the years ended December 31, 2022 and 2021 were prepared under the assumption that the Company will continue as a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. However, the Company has incurred net losses since its inception, and has negative cash flows from operations and will need additional funding to complete planned development efforts. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company had cash and cash equivalents of $ 10.1 million at December 31, 2022. It continues to develop the Symphony device and its first test for the measurement of IL-6. It remains committed to obtaining FDA clearance and has expanded clinical trials to obtain additional data to support its de novo FDA submission, while also continuing to build its manufacturing operations with its CMOs. Current cash resources and expected operating expenses are considered in determining its liquidity requirement; as well as $ 1.6 million of current liabilities on its balance sheet at December 31, 2022 and capital commitments of approximately $ 2 million during 2023 (see Notes 12 and 13). Given the Company’s current plans, the Company estimates cash resources will be sufficient to fund its operations through the fourth quarter of 2023. The Company will need additional capital to fund its planned operations for the next 12 months. The Company may seek to raise such additional capital through public or private equity offerings, grant financing and support from governmental agencies, convertible debt, collaborations, strategic alliances and distribution arrangements. Additional funds may not be available when it needs them on terms that are acceptable to them, or at all. If adequate funds are not available, it may be required to delay or reduce the scope of its research or development programs, its commercialization efforts or its manufacturing commitments and capacity. In addition, if it raises additional funds through collaborations, strategic alliances or distribution arrangements with third parties, it may have to relinquish valuable rights to its technologies or future revenue streams. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles in the United States (“GAAP”) and include all adjustments necessary for the presentation of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. On June 7, 2021, the Company’s Board of Directors declared a stock dividend of 2.15 shares of common stock for every share of common stock. This stock dividend was deemed a large stock dividend and was treated as a 1-for-3.15 stock split. The common stock shares and per share amounts (other than authorized shares) in these consolidated financial statements and related notes have been retroactively restated to reflect the stock dividend for all periods presented. F- 8 Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in accounting for the fair value-based measurement of stock-based compensation, accruals, convertible notes and warrants. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the condensed consolidated financial statements. Financial Statement Reclassifications Certain balances in the prior year consolidated financial statements have been reclassified to conform to the presentation in the current year consolidated financial statements. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents, consisting of highly liquid money market are carried at fair market value which approximates cost. Revenue Recognition The Company recognizes revenue under the core principles of depicting the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expected to be entitled. In order to achieve that core principle, the Company applies the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in that contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company recognizes revenue when performance obligations under the terms of the contract with the customer are satisfied and are recognized at a point in time, which is also when control is transferred. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g. when control transfers prior to delivery), they are considered fulfillment activities and, accordingly, the costs are accrued for when the related revenue is recognized. Sales tax and valued added taxes collected from the customers relating to product sales and remitted to governmental authorities are excluded from revenues. Leases Effective January 1, 2022, the Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) ASC 842, Leases (“ASC 842”). The Company has adopted ASC 842 using the optional transition method and, as a result, there have been no reclassification of prior comparable periods due to this adoption. The Company has arrangements involving the lease of facilities. Under ASC 842, at inception of the arrangement, the Company determines whether the contract is or contains a lease and whether the lease should be classified as an operating or a financing lease. This determination, among other considerations, involves an assessment of whether the Company can control the underlying asset and have the right to obtain substantially all to the economic benefits or outputs from the asset. F- 9 The Company recognizes right-of-use (“ROU”) assets and lease liabilities as of the lease commencement date based on the net present value of the future minimum lease payments over the lease term. ASC 842 requires the leases to use the rate implicit in the lease unless it is not readily determinable and then it may use its incremental borrowing rate (“IBR”) to discount the future minimum lease payments. Most of the Company’s leases do not provide an implicit rate; therefore, the Company uses its IBR to discount the future minimum lease payments. The Company determines its IBR with its credit rating and other economic information available as of the commencement date, as well as the identified lease term. During the assessment of the lease term, the Company considers its renewal options and extensions within the arrangements and the Company includes these options when it’s reasonably certain to extend the term of the lease. The Company leases include both lease and non-lease components. Consideration is allocated to the lease and non-lease components based on estimated standalone prices. The Company has elected to exclude non-lease components from the calculation of its ROU assets and lease liabilities. The Company has lease arrangements that contain incentives for tenant improvements as well as fixed rent escalation clauses. For contracts with tenant improvement incentives that are determined to be leasehold improvements and the Company is reasonably certain to exercise, it records a reduction to the lease liability and amortizes the incentive over the identified term of the lease as a reduction to rent expense. The Company records rental expense on a straight-line basis over the identified lease term on contracts with rent escalation clauses. Finance leases are not material to the Company’s consolidated financial statements. Concentration of Credit Risk Cash, and cash equivalents consist of financial instruments that potentially subject the Company to a concentration of credit risk in the event of a default by the related financial institution holding the securities, to the extent of the value recorded in the balance sheet. The Company invests cash that is not required for immediate operating needs primarily in highly liquid instruments with lower credit risk. Research and Development Expenses Costs incurred in the research and development of new products are expensed as incurred. Research and development costs include, but are not limited to, salaries, benefits, stock-based compensation, laboratory supplies, fees for professional service providers and costs associated with product development efforts, including preclinical studies and clinical trials. As of December 31, 2022 and 2021, respectively, the Company had $ 371,000 and $ 0 capitalized in property and equipment related to pre-production molds and tooling related to the Symphony device. The Company estimates preclinical study and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered. Stock-Based Compensation Share-based compensation expense for all share-based payment awards made to employees, directors and non-employees is measured based on the grant-date fair value of the award. Share-based compensation expense for awards granted to non-employees is determined using the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. The Company uses the Black-Scholes option pricing model to determine the fair value of options granted. The Company recognizes the compensation cost of share-based awards on a straight-line basis over the requisite service period. For stock awards for which vesting is subject to performance – based milestones, the expense is recorded over the implied service period after the point when the achievement of the milestone is probable, or the performance condition has been achieved. F- 10 The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The Company does not have a history of market prices of its common stock, and as such, volatility is estimated using historical volatilities of similar public entities. The expected life of the awards is estimated based on the simplified method for grants to employees and is based on the contractual term for non-employee awards. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on history and expectation of paying no dividends. The Company recognizes forfeitures related to employee share-based payments when they occur. Forfeited share-based awards are recorded as a reduction to stock compensation expense. Segment Reporting Management has determined that the Company has one operating segment, which is consistent with the Company structure and how it manages the business. Income Taxes The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions that require accrual or disclosure as of December 31, 2022. Any interest or penalties are charged to expense. During the years ended December 31, 2022 and 2021, the Company had no significant interest and penalties. Tax years subsequent to December 31, 2018 are subject to examination by federal and state authorities. The Company recognizes deferred tax assets and liabilities based on the impact of temporary differences between assets and liabilities recognized for tax and financial reporting purposes measured by applying enacted tax rates and laws that will be in effect when the differences are expected to reverse, net operating loss carryforwards and tax credits. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized. The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. Net Loss per Share Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of convertible preferred stock, convertible notes, options outstanding under the Company’s stock option plan and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares): December 31 2022 2021 Options to purchase common stock 719,835 503,433 Warrants for common stock 811,882 811,882 Class A Warrants for common stock 2,484,000 2,484,000 Class B Warrants for common stock 75,400 115,500 F- 11 Recently Adopted Accounting Standards In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases. The new guidance requires the recognition of lease liabilities, representing future minimum lease payments, on a discounted basis, and corresponding right-of-use assets on a balance sheet for most leases, along with requirements for enhanced disclosures to give financial statement users the ability to assess the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The Company adopted the provisions of ASU 2016-02 on January 1, 2022 and elected to implement the transition package of practical expedients permitted within the new standard, which included (i) not reassessing whether expired or existing contract contain leases, (ii) not reassessing lease classification, and (iii) not revaluing initial direct costs for existing leases. Adoption of the new standard resulted in the recording of initial right-of-use assets and lease liabilities of approximately $ 200,000 as of January 1, 2022. The new standard did not materially impact the Company’s consolidated statements of operations or cash flows. In May 2021, the FASB issued ASU 2021-04 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) . The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early application is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. The adoption date of this ASU did not have a material impact on the Company’s financial position and results of operations. Recently Issued Accounting Standards In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 805”) , an amendment of the ASC. The amendments to ASU 805 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination and require that an acquirer recognize and measure contract assets and contract liabilities acquired in accordance with ASC 2014-09, Revenue from Contracts with Customers (Topic 606) (“ ASC 606”). Under GAAP, an acquirer generally recognizes assets and liabilities assumed in a business combination, including contract assets and liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. This ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating the effect that this standard may have on its financial position and related disclosures. 3. LICENSE AND SUPPLY AGREEMENT WITH TORAY INDUSTRIES On October 6, 2020, the Company entered into a License and Supply Agreement (“License Agreement”) with Toray Industries, Inc. (“Toray”). Under the License Agreement, the Company received the exclusive license (outside of Japan) to make and distribute protein detection cartridges that have a function of automatic stepwise feeding of reagent (the “Cartridges”). In exchange for the license, the Company committed to make two payments of $ 120,000 each, both of which were made in 2021. In addition, following the first sale of the Cartridges after regulatory approval, the Company will make royalty payments to Toray equal to 15 % of the net sales of the Cartridges for the period that any underlying patents exist or five years after the first sale. Following the first sale after obtaining regulatory approval, the Company will make minimum annual royalty payments of $ 60,000 for the first year and $ 100,000 for each year thereafter, which shall be creditable against any royalties owed to Toray in such calendar year. There were no sales of or revenues from the Cartridges during the 12-month periods ended December 31, 2022 and 2021. At December 31, 2022 and 2021, there were no amounts accrued related to the License Agreement. F- 12 4. NOTES PAYABLE 2017 Notes Payable In 2017, the Company entered into multiple Unit Purchase Agreements (the “Financing”) whereby the Company issued 106 Units. Each Unit consisted of 100 shares of Series A redeemable, convertible preferred stock (“Series A”) at a purchase price of $100 per share and $10,000 in notes payable (the “Notes”). The Company defaulted on certain Notes issued in 2017 with aggregate principal amount of $ 1,060,000 in January 2021. On February 17, 2021, the Company repaid in cash $ 268,000 in principal and $ 2,010 in accrued interest on the Notes. On May 26, 2021, the remaining Notes of $ 580,000 were amended and restated (the “Amended Notes”). The Amended Notes accrue no interest and were due in May 2023. On June 8, 2021, the Amended Notes were automatically convertible into 580,000 shares of common stock at the conversion rate of $ 1.00 per share upon the issuance by the Company of securities to Sabby Volatility Warrant Master Fund, Ltd (“Sabby”) (the “Sabby Agreement”). The amendment and subsequent conversion of the Notes was accounted for as the debt settlement in equity under ASC 470-60 Troubled Debt Restructurings by Debtors . The Company recognized a gain on extinguishment of $ 6,360 , equal to the difference between the carrying amount of the Amended Notes at the conversion date, totaling $ 586,360 , and the fair value of the common stock shares issued to the noteholders of $ 580,000 . This gain on extinguishment is included in other income on the consolidated statement of operations for the year ended December 31, 2021. For the year ended December 31, 2021 the interest expense on the Notes was $ 6,360 . The allocation of the gross proceeds from the Financing resulted in recording a premium on the Notes of $ 583,349 . The premium is amortized over the term of the Notes. As a result of the event of default in January 2021 and the Notes becoming due on demand, the Company accelerated the amortization of the premium and discount and amortized the remaining balances during the three-month period ended March 31, 2021. The Company recognized the amortization of the premium of $ 145,837 as a reduction to non-cash interest expense during the year ended December 31, 2021. The premium amortization was included within interest income (expense) on the consolidated statements of operations. In connection with the Financing, the Company paid $ 183,194 in issuance costs of which $ 91,597 was recorded as a discount on the Notes and is being amortized over the term of the Notes. The remaining $ 91,597 was netted with the proceeds allocated to Series A (see Note 7). The Company recognized the amortization of the discount of $ 22,899 as non-cash interest expense during the year ended December 31, 2021. The discount amortization was included in the interest income (expense) on the consolidated statements of operations. 2020 Subordinated Notes On October 22, 2020, the Company issued $ 154,000 in subordinated promissory notes (“Subordinated Notes”) to the Company’s stockholders, including $ 30,000 to Lana Management and Business Research International, LLC (“LMBRI”). The Subordinated Notes accrued interest at 8 % payable at each quarter end and had a maturity date of March 31, 2021. The Company defaulted on the Subordinated Notes on March 31, 2021, and the Subordinated Notes started to accrue 15 % penalty interest starting on the date of default. For the year ended December 31, 2021 interest expense on the Subordinated Notes was $ 7,443 . In conjunction with the issuance of the Subordinated Notes, the Company issued to each noteholder warrants to purchase shares of the Company’s common stock (“Subordinated Note Warrants”) totaling 4,846,688 Common Stock Warrants, of which 944,160 were issued to LMBRI. The allocation of the proceeds to the Subordinated Note Warrants resulted in a discount to the Subordinated Notes of $ 148,892 . The Company amortized this discount through non-cash interest expense using the effective interest method, of which $ 83,752 was amortized during the year ended December 31, 2021, and included in the interest income (expense) in the consolidated statement of operations. On June 7, 2021, the holders of $ 132,383 in principal of the Subordinated Notes elected to exercise their warrants into 4,166,357 shares of common stock, with the principal from the Subordinated Notes applied to the exercise price of the warrants. The remaining $ 21,617 principal amount of the Subordinated Notes was repaid in cash in 2021. 5. CONVERTIBLE DEBENTURES On June 7, 2021, the Company entered into a Securities Purchase Agreement with Sabby, under which the Company committed to sell, and Sabby agreed to purchase, an aggregate of $ 4,500,000 principal amount of debentures, of which $ 3,000,000 upon execution of the agreement and the remaining $ 1,500,000 within three trading days of the later of (i) the date that the Company files the Registration Statement with the SEC and (ii) the date that the Company files the registration statement registering the shares of common stock to be issued in the IPO. F- 13 On June 8, 2021, the Company issued a total of $ 3,000,000 of 7.5 % Senior Secured Convertible Debentures (the “Convertible Debentures”) to Sabby. On August 4, 2021, the Company issued an additional $ 1,500,000 of Convertible Debentures upon the filing of a registration statement in connection to the IPO, which was filed on July 22, 2021. The Convertible Debentures’ principal amount was convertible, at the holder’s option, into the Company’s Series D Convertible Preferred Stock (Series D) at $ 1,000 conversion price per share. The Convertible Debenture was automatically converted into Series D upon the effectiveness of an IPO. For the year ended December 31, 2021, interest expense on the Convertible Debentures was $ 124,829 . In connection with the IPO, all of the Company’s outstanding Convertible Debentures automatically converted into 4,500 shares of Series D Preferred Stock on the IPO Date. Subsequently, the holder of the 4,500 outstanding shares of Series D Preferred Stock exercised their option to convert their shares into 4,500,000 shares of common stock. The Company incurred $ 729,658 in issuance costs consisting of cash payments and 225,000 warrants (the “Dawson Warrants”) issued to the placement agent for compensation for their services in relation to the issuance of the Convertible Debentures. The Dawson Warrants are exercisable after May 10, 2022 at the exercise price of $ 1.25 per share of common stock and have a 5 -year term. The Dawson Warrants were accounted for as equity under ASC 815 – Derivatives and Hedging , and the grant date fair value was estimated to be $ 166,816 using Black-Scholes option pricing model and is included in issuance costs related to the Convertible Debentures. The resulting discount is amortized over the term of the Convertible Debentures using the effective interest method. The Company recognized $ 266,193 of amortization of the discount during the year ended December 31, 2021, which was included within interest income (expense) in the consolidated statement of operations. The remaining $ 463,465 of unamortized discount was credited to the capital accounts at the time of conversion. 6. WARRANTS The following table summarizes information with regard to warrants outstanding at December 31, 2022: Shares Exercisable for Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Common Stock Warrants 811,882 Common Stock $ 3.24 3.1 Class A Warrants 2,484,000 Common Stock $ 7.00 3.8 Class B Warrants 75,400 Common Stock $ 10.00 1 3.8 1 Class B Warrants may also exercise such warrants on a “cashless” basis. See Class A Warrants and Class B Warrants subsection below. No warrants were issued during the year ended December 31, 2022. The following assumptions were used in the Black-Scholes option pricing model to estimate the fair value of the warrants granted during the year ended December 31, 2021: Risk-free interest rate 0.37 % - 0.73 % Dividend rate 0 % Volatility 106.00 % - 142.46 % Expected life (in years) 5 F- 14 Common Stock Warrants In March 2021, the Company granted a financial advisor warrants to purchase 226,599 shares of the Company’s common stock (the “Advisor Warrants”) as consideration for services in connection with the IPO. The warrants are exercisable at any time from the issuance date at the exercise price of $ 3.177 per share of common stock, subject to adjustment based on the amounts raised in the IPO, and have a 5 -year term. These warrants were accounted for as equity and the grant date fair value was estimated to be $ 180,339 and were netted against the IPO proceeds. The terms of the advisory services agreement also provide for an incentive bonus of $ 200,000 payable upon closing of the IPO if such a closing occurs on or before January 31, 2022. This amount was netted against the IPO proceeds. As of December 31, 2022 and 2021, all of the Advisor Warrants remained outstanding. In August 2021, the Company granted the Dawson Warrants to its placement agent for compensation for their services in relation to the issuance of the Convertible Debentures (see Note 5). As of December 31, 2022 and 2021, all of the Dawson Warrants remained outstanding. In November 2021, the Company granted 108,000 warrants (the “Underwriter Warrants”) with an exercise price of $ 12.50 , and a fair value of approximately $ 356,000 , to the underwriter of the IPO which is in addition to the cash fees paid for underwriting the Company’s IPO. As of December 31, 2022 and 2021, all of the Underwriter Warrants remained outstanding. In October 2020, in conjunction with the issuance of the Subordinated Notes, the Company granted 4,846,688 warrants (the “Subordinated Note Warrants”) to the noteholders, of which 944,160 were issued to LMBRI (see Note 4). In November 2021, the terms of some of the Subordinated Note Warrants were amended to provide for cashless exercise. During 2021, 4,718,251 of the Subordinated Note Warrants were exercised. As of December 31, 2022 and 2021, 128,438 of the Subordinated Note Warrants were outstanding. Class A Warrants and Class B Warrants In conjunction with the Company’s IPO as described in Note 1 the Company issued 2,160,000 Class A Warrants and 2,160,000 Class B Warrants. Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A Warrants and Class B Warrants, shortly after the IPO Date resulting in an additional issuance of 324,000 Class A Warrants and 324,000 Class B Warrants. From the net IPO proceeds, $ 5,164,751 and $ 7,323,161 , respectively, were apportioned to the Class A Warrants and Class B Warrants. Class A Warrants entitle the holder to purchase one share of common stock at an exercise price of $ 7.00 per share. As of December 31, 2022 and 2021 all Class A Warrants were outstanding. Class B Warrants entitle the holder to purchase one share of common stock at an exercise price of $ 10.00 per share. Holders of Class B Warrants may also exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $10.0 million of volume is traded in the Company’s common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). During 2022 and 2021, respectively, 40,100 and 2,368,500 Class B Warrants were exercised, all on a cashless basis. As of December 31, 2022 and 2021, respectively, 75,400 and 115,500 Class B Warrants were outstanding. Warrants for Series B Redeemable, Convertible Preferred Stock The 643 Series B Warrants (defined below) issued in conjunction with the Series B redeemable, convertible preferred stock (see Note 7) were accounted for as a derivative liability under ASC 480 – Distinguishing Liabilities from Equity. On June 1, 2021, the Series B Warrants were amended (“Amended Series B Warrants”) to become exercisable into 115,190 shares of common stock at an exercise price of $ 2.30 per share and are now reflected as common stock warrants in the table of outstanding warrants above. The Amended Series B Warrants were accounted for as equity and reclassified from liabilities into additional paid-in capital at the fair value determined as of the amendment date of $ 145,953 . F- 15 The fair value of the outstanding the Amended Series B Warrants at June 1, 2021 was based on the assumptions as follows: June 1, 2021 Risk-free interest rate 0.31 % - 0.56 % Dividend rate 0 % Volatility 88.60 % Expected life (in years) 2.81 – 4.22 7. PREFERRED STOCK In 2017 in connection with the Financing (see Note 4), the Company issued 10,600 shares of Series A. The allocation of proceeds from the Financing was based on the relative fair values of the Notes and Series A resulting in the Series A being recorded at $ 476,651 , net of $ 91,597 of issuance costs. Series A were being accreted to the redemption value through December 31, 2021, the redemption date. Accretion of Series A to redemption value, including the accretion of dividends and issuance costs, was $ 73,912 for year ended December 31, 2021. In 2019, the Company entered into Subscription Agreements, as amended, for the issuance of 4,455 shares of Series B plus the committed future issuance of 415 of additional shares (the “Series B Financing”). The Series B Financing also resulted in the issuance of a total of 848 warrants (the “Series B Warrants”). Series B were subject to accretion to the redemption value through the redemption date. Accretion of Series B to redemption value, including the accretion of dividends and issuance costs, was $ 33,993 for the year ended December 31, 2021. On November 19, 2020, the Company entered into a Subscription Agreement for the issuance of Series C redeemable, convertible preferred stock (the “Series C Financing”) with Toray. In connection with the Series C Financing, the Company issued 636 shares of Series C at a purchase price of $ 1,578.50 per share. Proceeds from the Series C Financing, net of issuance costs, were $ 994,832 . Series C were being accreted to the redemption value through December 31, 2021, the redemption date. Accretion of Series C to redemption value, including the accretion of dividends and issuance costs, was $ 19,961 for the year December 31, 2021. On June 1, 2021, in connection with the Sabby Agreement (see Note 5), Series A were converted into 1,668,016 shares of common stock, Series B were converted into 816,226 shares of common stock, and Series C were converted into 100,081 shares of common stock. The conversion was affected through the joint consent of the Company’s Board of Directors and stockholders and was subject to and in accordance with the terms of the Certificates of Designation. As a result of the conversion, the temporary equity balances at the conversion date were reclassified into the stockholders’ equity. On June 7, 2021, the Company filed a certificate of designation of preferences, rights, and limitations with the state of Delaware for up to 4,500 shares of Series D convertible preferred stock (“Series D”). In connection with the IPO, all of the outstanding Convertible Debentures automatically converted into 4,500 shares of Series D on the IPO Date. In November 2021, all Series D was converted into 4,500,000 shares of common stock. There were no Series D outstanding as of December 31, 2022. 8. STOCK COMPENSATION Stock Incentive Plans In 2018, the Company adopted the 2018 Stock Incentive Plan (the “2018 Plan”) for employees, consultants, and directors. The 2018 Plan, which is administered by the Company’s Board of Directors, permits the Company to grant incentive and nonqualified stock options for the purchase of common stock, and restricted stock awards. The maximum number of shares of common stock reserved for issuance under the 2018 Plan is 629,440 . At December 31, 2022 there were 262,269 shares of common stock available for grant under the 2018 Plan. On July 6, 2021, the Company’s Board of Directors and stockholders approved and adopted the Bluejay Diagnostics, Inc. 2021 Stock Plan (the “2021 Plan”). A total of 1,960,000 shares of common stock were approved to be initially reserved for issuance under the 2021 Stock Plan. At December 31, 2022 there were 1,339,721 shares of common stock available for grant under the 2021 Plan. F- 16 Stock Award Activity The following table summarizes the status of the Company’s non-vested restricted stock awards for years ended December 31, 2022: Non-vested Restricted Stock Awards Number of Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2021 - $ - Granted 105,000 1.29 Vested - - Forfeited ( 45,000 ) 1.29 Outstanding at December, 2022 60,000 $ 1.29 The following is a summary of stock option activity for the year ended December 31, 2022: Number of Stock Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Outstanding at December 31, 2021 589,786 $ 1.86 8.3 $ 605,187 Granted 236,279 1.80 Exercised ( 62,944 ) 0.46 21,354 Cancelled and forfeited ( 43,286 ) 1.86 Outstanding at December 31, 2022 719,835 $ 1.96 6.5 $ 20,578 Exercisable at December 31, 2022 495,101 $ 1.97 7.6 $ 20,578 The weighted average grant date fair value of options granted during the years ended December 31, 2022 and 2021 was $ 1.42 per share and $ 1.16 per share, respectively. The Company calculated the grant-date fair value of stock option awards granted during the years ended December 31, 2022 and 2021 using the Black-Scholes model with the following assumptions: 2022 2021 Risk-free interest rate 1.58 % – 4.35 % 0.78 % – 1.27 % Expected dividend yield 0.00 % 0.00 % Volatility factor 102.03 % – 107.36 % 106.00 % – 114.76 % Expected life of option (in years) 5.40 – 6.00 5.00 – 6.00 Stock-Based Compensation Expense For the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expense as follows: Year ended December 31, 2022 2021 Research and development $ 64,352 $ 29,543 General and administrative 367,702 17,315 Marketing and business development 950 21,600 Total stock-based compensation $ 433,004 $ 68,458 F- 17 At December 31, 2022, there was approximately $ 111,357 of unrecognized compensation expense related to non-vested stock option awards that are expected to be recognized over a weighted-average period of 2.2 years. At December 31, 2022, there was approximately $ 50,859 of unrecognized compensation expense related to non-vested restricted stock awards that are expected to be recognized over a weighted-average period of 2.1 years. 9. RELATED PARTY TRANSACTIONS Lana Management and Business Research International, LLC Lana Management and Business Research International, LLC (“LMBRI”) has board members in common with the Company. The Company and LMBRI entered into an Expense Sharing Agreement, whereby the Company will reimburse LMBRI monthly for certain shared expenses including insurance, rent, salaries, telephone, and other miscellaneous expenses. The Company was billed $ 4,000 monthly for these expenses through December 31, 2021. On January 1, 2022, the Company moved into its own leased facility and no longer shared expenses with LMBRI Such amounts are included in general and administrative expenses on the accompanying consolidated statements of operations. The Company also issued Subordinated Notes and Warrants to LMBRI in October 2020 as described in Note 4. The table below summarizes the amounts incurred, paid, and balances due to LMBRI as of and for year’s ended December 31, 2022 and 2021. 2022 2021 Expenses from LMBRI $ - $ 48,000 Expense Sharing Agreement payments to LMBRI $ - $ 171,102 Amounts payable to LMBRI $ 2,000 $ 2,000 Interest Incurred and Payments on Subordinated Notes to LMBRI (Note 4) $ - $ 3,303 NanoHybrids, LLC In December 2021, the Company entered into an agreement with NanoHybrids, LLC (“NanoHybrids”) to utilize the Company’s research and development staff and laboratory facility when available to perform work for NanoHybrids. Any hours worked by Company employees for NanoHybrids is billed to NanoHybrids at a bill rate of the respective employee’s fully burdened personnel cost plus 10 %. NanoHybrids is wholly owned by the Company’s Chief Technology Officer. The table below summarizes the amounts earned and due from NanoHybrids for the years ended December 31, 2022 and 2021 and balances due as of December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Income from NanoHybrids included in Other Income $ 163,256 $ - Cash receipts from NanoHybrids $ 143,525 $ - As of December 31, 2022 2021 Amounts receivable from NanoHybrids included in Prepaids and Other Current Assets $ 19,731 $ - Toray Industries, Inc. In June 2022, the Company sold five Symphony analyzers to the Company’s business partner, Toray, for $ 249,040 , all of which was paid in June 2022. Future sales to Toray are not currently anticipated. F- 18 10. SUPPLEMENTAL BALANCE SHEET INFORMATION Prepaid expenses and other current assets consist of the following: December 31, 2022 December 31, 2021 Prepaid insurance $ 751,979 $ 1,127,062 Prepaid clinical trial expenses - 160,467 Vendor prepayments 681,218 160,000 Prepaid other 240,283 165,179 Total prepaid expenses and other current assets $ 1,673,480 $ 1,612,708 Accrued expenses and other current liabilities consist of the following: December 31, 2022 December 31, 2021 Accrued personnel costs $ 533,577 $ 157,938 Accrued other 302,153 181,446 Total accrued expenses and other current liabilities $ 835,730 $ 339,384 11. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 2022 and 2021: December 31, Depreciable lives 2022 2021 Construction in process $ 375,466 $ 15,078 Furniture, fixtures, and equipment 3 - 5 years 136,942 24,915 Software 3 years 4,457 4,619 Lab equipment 3 - 5 years 1,268,380 741,591 Leasehold improvements Life of lease 43,231 - 1,828,476 786,203 Less: accumulated depreciation ( 596,406 ) ( 448,837 ) Property and equipment, net $ 1,232,070 $ 337,366 12. LEASES The Company primarily enters into lease arrangements for office and laboratory space. A summary of supplemental lease information is as follows: Year ended December 31, 2022 Weighted average remaining lease term – operating leases (in years) 3.7 Weighted average remaining lease term – finance leases (in years) 5.1 Weighted average discount rate 7.0 % Operating cash flows from operating leases $ 149,770 F- 19 A summary of the Company’s lease assets and liabilities are as follows: December 31, 2022 Operating lease right-of-use asset $ 465,514 Finance lease asset included in property & equipment, net 21,067 Total lease assets 486,581 Current portion of operating lease liability 168,706 Current portion of finance lease liability included in accrued expenses 4,807 Non-current operating lease liabilities 323,915 Non-current finance lease liabilities included in other non-current liabilities 15,823 Total lease liabilities $ 513,251 A summary of the Company’s estimated operating lease payments are as follows: Year 2023 $ 168,706 2024 162,991 2025 100,000 2026 100,000 2027 25,000 Thereafter - Total future lease payments 556,697 Less: Imputed interest 64,076 Present value of lease liability $ 492,621 13. COMMITMENTS AND CONTINGENCIES Purchase Commitments In October 2022, the Company entered into a non-cancelable purchase commitment with an international materials vendor for items needed for both development of the Symphony product line and also to resell to its customers. This agreement commits the Company to purchase approximately $ 800,000 in goods, of which 50 % was prepaid in 2022. No goods have been received under this arrangement as of December 31, 2022. The Company had multiple open purchase commitments with its primary contract manufacturing organization in Japan related to the buildout of a manufacturing line for the IL-6 cartridges for the Symphony device. As of December 31, 2022, the total open non-cancellable commitments for the manufacturing line buildout totaled approximately $ 375,000 . As of December 31, 2022, the Company has entered into other non-cancelable purchase commitments primarily for R&D supplies and key advisory services. The purchase commitments covered by these agreements are for less than one year and aggregate to approximately $ 700,000 . Minimum Royalties As required under the License Agreement (see Note 3), following the first sale of Cartridges, the Company will also make royalty payments to Toray equal to 15% of the net sales of the Cartridges for the period that any underlying patents exist or for 5 years after the first sale. Following the first sale, the Company will pay a one-time minimum royalty of $60,000, which shall be creditable against any royalties owed to Toray in such calendar year. The Company will pay a minimum royalty of $100,000 in each year thereafter, which are creditable against any royalties owed to Toray in such calendar year. There were no sales of or revenues from the Cartridges through December 31, 2022. F- 20 Indemnification The Company has certain agreements with service providers with which it does business that contain indemnification provisions pursuant to which the Company typically agrees to indemnify the party against certain types of third-party claims. The Company accrues for known indemnification issues when a loss is probable and can be reasonably estimated. The Company would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As the Company has not incurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented. 14. INCOME TAX No provision for federal income taxes has been recorded for the years ended December 31, 2022 and 2021 due to net losses and the valuation allowance established. Significant components of the Company’s deferred tax assets are as follows: As of December 31, 2022 2021 Deferred tax assets: Net operating losses $ 3,043,585 $ 1,791,043 Tax credits 190,489 3,659 Intangible assets 66,716 68,564 Capitalized R&D expenses 1,018,165 - Fixed assets 37,580 - Other 272,106 97,945 Total deferred tax assets 4,628,641 1,961,211 Valuation allowance ( 4,628,641 ) ( 1,934,351 ) Net deferred tax assets $ - $ 26,860 Deferred tax liabilities: Fixed assets - ( 26,860 ) Net deferred tax assets $ - $ ( 26,860 ) A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 2022 and 2021 is as follows: Year Ended December 31, 2022 2021 Federal statutory rate 21.00 % 21.00 % State income taxes, net of federal benefit and tax credits 6.86 % 5.41 % Change in valuation allowance ( 29.06 )% ( 25.88 )% Permanent differences 1.20 % ( 0.53 )% Effective tax rate 0.00 % 0.00 % The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, the Company considers taxable income in prior carryback years, as permitted under the tax law, forecasted taxable earnings, tax planning strategies, and the expected timing of the reversal of temporary differences. This determination requires significant judgment, including assumptions about future taxable income that are based on historical and projected information and is performed on a jurisdiction-by-jurisdiction basis. The Company continues to maintain a full valuation allowance against its net deferred tax assets. During the years ended December 31, 2022 and 2021, management assessed the positive and negative evidence in its operations and concluded that it is more likely than not that its deferred tax assets as of December 31, 2022 and 2021 will not be realized given the Company’s history of operating losses. The valuation allowance against deferred tax assets increased by approximately $ 2.7 million and $ 900,000 and during 2022 and 2021, respectively, related mainly to a full valuation allowance recorded against capitalized research expenditures, additional net operating losses and tax credits generated in the year. At December 31, 2022, the Company had federal net operating loss carryforwards of approximately $ 11.2 million. The Company’s federal net operating losses incurred prior to 2018 totaling $ 713,000 expire through 2037, while its federal net operating losses incurred in 2018 to 2022 totaling $ 10.5 million can be carried forward indefinitely. As of December 31, 2022, the Company had post-apportioned state net operating losses of $ 10.9 million that can generally be carried forward 20 years and will expire at various dates through 2042. As of December 31, 2021, the Company had post-apportioned Massachusetts net operating losses of $ 6.3 million that can generally be carried forward 20 years and will expire at various dates through 2041. The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research or experimental (“R&E”) expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&E expenditures that are paid or incurred in connection with their trade or business which represent costs in the experimental or laboratory sense. Specifically, costs for U.S. based R&E activities must be amortized over five years and costs for foreign R&E activities must be amortized over 15 years; both using a midyear convention. The Company has implemented this standard on January 1, 2022, noting that the impact on the Company’s consolidated financial statements was immaterial. F-21